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MELBOURNE, Dec 27 AAP

December 27 2012, 10:50AM

EnergyAustralia has shelved plans to build a gas-fired power station in Victoria due to falling wholesale prices and energy demand.

EnergyAustralia said it had told the Victorian government it had deferred work on its request for planning permission to develop and operate an Open Cycle Gas Turbine power station in Yallourn, east of Melbourne.

The proposal allowed for the plant to be converted to a 1000MW Combined Cycle Gas Turbine plant.

EnergyAustralia's group executive manager, energy markets, Mark Collette, said the falling wholesale prices combined with the recent further deterioration in energy demand had led to the decision.

He said the falling demand meant the plant was not likely to be required until much later in the decade.

"We have therefore decided to put the development on hold until market conditions improve," he said.

"We are seeing further deterioration in the energy market and wholesale prices, and we don't expect conditions to improve in the foreseeable future.

Mr Collette said continuing with the permit stage was not financially sustainable.

The company would review the decision if there were significant improvements in the energy market, he said.

Mr Collette said the decision would not impact the operations of Yallourn Power Station.

In October, EnergyAustralia blamed the carbon price on its decision to close one of its four units at the Yallourn plant.